The Appellate Body ruling in Seals: Article I:1 MFN

This is the first in a series of posts on different specific aspects of the AB ruling in Seal Products. On the big picture result, Jo Langille, Katie Sykes and I should be commenting in short order in a number of fora.

With respect to MFN GATT Article I:1 the Appellate Body made several important doctrinal statements.

First, it indicated that the legal standard of "treatment no less favourable" under MFN is essentially the same as that for National Treatment GATT Article III. Second, the AB has held that there is a single fundamental purpose animating MFN and National Treatment: the preservation of equality of competitive opportunities. Third,the Appellate Body, rejecting implicitly the approach of the panel in EC-GSP, held that the language "unconditionally" in I:1 does not prohibit all conditions that make distinctions between like products but only those that "resulting a detrimental impact on competitive opportunities for like imported products from any Member." Fourth, the AB held that an origin-neutral measure will nevertheless violate the legal standard of I:1 where its "design, structure and expected operation" (here quoting the panel) result in detrimental effects on the conditions of competition. Finally, the AB rejected the suggestion of the EU that, before finding a definitive violation of I:1 the adjudicator, should assure itself that the detrimental effects do not derive exclusively from a legitimate regulatory distinction.

On the basis of these interpretations of law, the AB upheld the panel's finding of a violation of I:1. It did so by not questioning the panel's conclusion that the detrimental effects, the greater market access for Greenland seal products relative to Canadian and Norweigian products, were indeed a product of the "design, structure, and expected operation" of the EU measure, rather than extraneous conditions (the way in which the Canadian government structures the hunt, determining through its policies the relative size of the commercial to other hunts, for example). This deference to the panel is understandable, because here unfortunately the panel's finding could be characterized as one of a factual nature.

What the AB did not say (even while rejecting the EU legitimate regulatory distinction argument) was that detrimental effects on competition are sufficient on their own to violate the legal standard under 1:1 These effects must be found to be caused by particular features of the "design, structure, and expected operation" of the measure. It may be a crucial factual inquiry whether other factors unrelated to the design, structure and expected operation of the measure may have contributed to or produced the detrimental effects on competition in question. I will say more about this in my next post , on the AB's decision on GATT III:4, National Treatment, and especially its view of its own decision in DR-Cigarettes.

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The Appellate Body ruling in Seals: Article I:1 MFN

This is the first in a series of posts on different specific aspects of the AB ruling in Seal Products. On the big picture result, Jo Langille, Katie Sykes and I should be commenting in short order in a number of fora.

With respect to MFN GATT Article I:1 the Appellate Body made several important doctrinal statements.

First, it indicated that the legal standard of "treatment no less favourable" under MFN is essentially the same as that for National Treatment GATT Article III. Second, the AB has held that there is a single fundamental purpose animating MFN and National Treatment: the preservation of equality of competitive opportunities. Third,the Appellate Body, rejecting implicitly the approach of the panel in EC-GSP, held that the language "unconditionally" in I:1 does not prohibit all conditions that make distinctions between like products but only those that "resulting a detrimental impact on competitive opportunities for like imported products from any Member." Fourth, the AB held that an origin-neutral measure will nevertheless violate the legal standard of I:1 where its "design, structure and expected operation" (here quoting the panel) result in detrimental effects on the conditions of competition. Finally, the AB rejected the suggestion of the EU that, before finding a definitive violation of I:1 the adjudicator, should assure itself that the detrimental effects do not derive exclusively from a legitimate regulatory distinction.

On the basis of these interpretations of law, the AB upheld the panel's finding of a violation of I:1. It did so by not questioning the panel's conclusion that the detrimental effects, the greater market access for Greenland seal products relative to Canadian and Norweigian products, were indeed a product of the "design, structure, and expected operation" of the EU measure, rather than extraneous conditions (the way in which the Canadian government structures the hunt, determining through its policies the relative size of the commercial to other hunts, for example). This deference to the panel is understandable, because here unfortunately the panel's finding could be characterized as one of a factual nature.

What the AB did not say (even while rejecting the EU legitimate regulatory distinction argument) was that detrimental effects on competition are sufficient on their own to violate the legal standard under 1:1 These effects must be found to be caused by particular features of the "design, structure, and expected operation" of the measure. It may be a crucial factual inquiry whether other factors unrelated to the design, structure and expected operation of the measure may have contributed to or produced the detrimental effects on competition in question. I will say more about this in my next post , on the AB's decision on GATT III:4, National Treatment, and especially its view of its own decision in DR-Cigarettes.